Intercell announces Q4 and preliminary full year 2007 results

Intercell announces Q4 and preliminary full year 2007 results First profitable year in company history – Vaccine against Japanese Encephalitis fully on track towards all markets – Excellent progress in product pipeline and strategic partnerships – focus on new vaccines against hospital-acquired infections and improved Influenza vaccines

FIRST PROFITABLE YEAR IN INTERCELL'S HISTORY – CLEAR GROWTH IN REVENUES AND PROFITABILITY EXPECTED FOR 2008

» EUR 5.0 m net profit and positive operating cash flow of EUR 41.7 m


» Revenues of EUR 53.3 m, an increase of 127.5 percent – driven by payments from strategic alliances


» R&D costs of EUR 40.4 m enabled all programs to be progressed forward at full speed in order to fully take advantage and create the maximum possible value from the development programs and technology platforms


» Strong cash position with EUR 287.6 m – plus, unconditional EUR 40.0 m payment already committed for 2008


» Clear revenue and profit growth expected in 2008 based on the approval of the Japanese Encephalitis vaccine and on income from product and technology partnerships


» Given this result and strategy, Intercell joined the ranks of the few profitable biotechnology companies worldwide


CLEAR STRATEGY TO MARKET FOR THE FIRST PRODUCT – INTERCELL'S INVESTIGATIONAL JAPANESE ENCEPHALITIS VACCINE


» Market Authorization Application (MAA) in Europe and Biological License Application (BLA) with the US Food and Drug Administration (FDA) submitted in December 2007, and already excepted


» Licensure application to Australian Therapeutic Goods Administration (TGA) submitted in February of 2008


» Intercell Biomedical Ltd. (Scotland) received Manufacturer's License for commercial manufacturing


» FDA pre-approval inspection of the facilities pre-scheduled for April of 2008


» Data from pediatric clinical trials in endemic countries expected within the next weeks


» Intercell’s cooperation with the US Army, geared toward the long-term supply of the JE-vaccine for the military, is progressing well – contractual agreement expected latest upon FDA approval


NOVARTIS ALLIANCE


» Phase I clinical trial for an improved seasonal Influenza vaccine formulated with IC31® completed successfully – Intercell's adjuvant IC31® demonstrates very good safety and tolerability profile. Novartis will continue clinical Phase I/II development of IC31® adjuvanted flu vaccines in 2008


» Joint therapeutic vaccine program against HCV met primary endpoints in Phase II – data confirms findings of the interim analysis from Q3 2007 – statistically significant viral load reduction and excellent safety profile – further clinical trials in co-development with Novartis to include IC31®


» Cooperation with Novartis is based on a major strategic partnership that was signed in July of 2007


HOSPITAL-ACQUIRED INFECTIONS


» S. aureus vaccine – Merck & Co., Inc. has initiated Phase II clinical development by the end of 2007. ' Intercell expects further extension of clinical program into additional indications in early 2008


» Pseudomonas vaccine – preparations for start of clinical Phase II/III trials in 2008 underway


» Pre-clinical candidates for further nosocomial vaccine and antibody product targets including Klebsiella have been identified


TUBERCULOSIS


» Further clinical trials started at the Department of Infectious Diseases at the Leiden University Medical Center, Netherlands, within the new global franchise to fight Tuberculosis


» Tuberculosis vaccine will be further developed in a collaboration between Sanofi Pasteur and Statens Serum Institut (SSI) including Intercell's adjuvant IC31®, strongly supported by the Aeras Global Tuberculosis Foundation and the EU


TECHNOLOGY PLATFORMS: IC31® & AIP®


» Pneumococcus vaccine candidate funded by PATH on course to entering clinical Phase I trials in 2008


» Developmental programs and partnerships in the field of vaccines and monoclonal antibodies for Group B Streptococcus and hospital-acquired infections to be accelerated


» New partnerships for adjuvant IC31® and the definition of new vaccine candidates from AIP® expected for 2008


MANAGEMENT BOARD


» The Management Board, with Gerd Zettlmeissl as Chief Executive Officer, Werner Lanthaler as Chief Financial Officer, and Alexander von Gabain as Chief Scientific Officer appointed for a further three-year term. Thomas Lingelbach appointed as new member of the Management Board as Chief Operating Officer.


(Vienna, 3. 3. 2008) Today, vaccine company Intercell AG (VSE: ICLL) announced its financial results for the fourth quarter and the preliminary results for the full financial year 2007 and presented an update on the Company’s development programs.


"We made significant progress in 2007 in regards to our mission of becoming the global innovation leader in the field of vaccines. We will continue to give the highest strategic priority to fostering our innovative power on the basis of sustained profitability. We are thoroughly convinced that this will create the highest additional shareholder value," stated Gerd Zettlmeissl, Intercell CEO.


"Achieving sustainable profitability earlier than planned, and even before bringing our first product to market, is a unique success. Given the significantly lowered risk profile of the company through a diversified portfolio of product candidates, world-class partnerships, and a very strong cash position, we have built a solid basis for innovation and aggressive growth," stated Werner Lanthaler, Intercell CFO.


UPDATE ON DEVELOPMENT PROGRAMS


CLEAR STRATEGY TO MARKET FOR INTERCELL'S INVESTIGATIONAL JAPANESE ENCEPHALITIS VACCINE


Significant progress can be reported towards market approval of the prophylactic Japanese Encephalitis vaccine. The production process at Intercell's manufacturing site in Livingston (Scotland) was fully established and commercial production started successfully. In January of 2008, Intercell Biomedical Ltd. received a Manufacturer's License for the commercial manufacturing of the vaccine. The issuance of the license followed a GMP (Good Manufacturing Practice) inspection performed by the Medicines and Healthcare products Regulatory Agency (MHRA). The license is required to support the Marketing Authorization Application (MAA) process in Europe, which is coordinated by the European Medicines Agency (EMEA), and represents the basis for future product release and export to the US. The Market Authorization Application (MAA) in Europe, as well as the Biological License Application (BLA) with the US Food and Drug Administration (FDA), were submitted in December of 2007 and accepted in early 2008. The licensure application to TGA (Therapeutic Goods Administration) in Australia was submitted in February of 2008.


In order to enter the endemic markets and develop the pediatric application of the vaccine, Intercell started Phase II clinical trials of the Japanese Encephalitis virus in India together with its partner Biological E. Ltd. (Hyderabad, India). This represents the first time that Intercell’s Japanese Encephalitis vaccine will have been administered to children. The results of this Phase II trial are expected within the next weeks.


Based on Intercell’s successful collaboration with the US Army, an agreement for the strategic long-term supply of the vaccine is expected latest upon FDA approval.


INTERCELL-NOVARTIS ALLIANCE – PROGRAMS FULLY IMPLEMENTED AND ON TRACK


In July of 2007, Intercell and Novartis signed a major strategic partnership to accelerate innovations in vaccine development for infectious diseases. Novartis’ subscription of new shares for EUR 150 m was completed in September of 2007. This increased Novartis’ equity stake from 6.1% to 15.9%.


The current operational focus of the partnership is the development of an improved Influenza vaccine comprising IC31® and the global co-development of a therapeutic Hepatitis C vaccine.


In February of 2008, the first Phase I clinical trials were completed for the company's adjuvant IC31® in combination with the seasonal, trivalent Influenza vaccine Agrippal® from Novartis. Primary endpoints of the study show that Intercell's adjuvant IC31® demonstrates a very good safety and tolerability profile; seroconversion and seroprotection rates support further clinical development. Novartis will continue clinical Phase I/II development of IC31® adjuvanted flu vaccines during 2008.


Furthermore, the implementation of co-development in the field of Hepatitis C was started in Q1 2008, to include Intercell’s adjuvant IC31®.


LEADING POSITION IN VACCINES AGAINST HOSPITAL-ACQUIRED INFECTIONS EXPANDED


In December of 2007, Intercell announced significant progress in the development of a vaccine against S. aureus. The vaccine, developed in a collaborative program with Merck & Co., Inc., has entered clinical Phase II trials started in the US. The S. aureus vaccine is based on an antigen discovered by Intercell and licensed to partner Merck & Co., Inc., on an exclusive worldwide basis. The start of the Phase II trials resulted in a milestone payment of USD 4 m to Intercell. It proves Intercell's power for innovation in the development of new bacterial vaccine candidates. Intercell expects further extension of the clinical trial program in early 2008.


Preparations for the start of clinical Phase II/III trials of our Pseudomonas vaccine in 2008 are on track. Current activities include the production and release of clinical trial materials and the planning of clinical settings for the prophylactic testing of the vaccine, with a focus on preventing Pseudomonas infections in intensive care units.


Pre-clinical candidates for further nosocomial vaccine and antibody product targets including Klebsiella have been identified.


HEPATITIS C (HCV) VACCINE


The analysis of Phase II data for the peptide-based therapeutic Hepatitis C vaccine reveals statistically significant viral load reduction and a favorable safety profile, and confirms findings from the interim analysis conducted in Q3 of 2007. The obtained data showed that the primary endpoint set for this study, namely a HCV-RNA decline that was statistically significant and sustained, has been met. The Phase II interim data opens the door for therapeutic vaccination in the arena of existing and future treatment options.


Further clinical trials in co-development with Novartis will also take advantage of an enlarged antigen portfolio and of IC31®, Intercell’s second-generation adjuvant.


TUBERCULOSIS (TB) VACCINE ENTERS FURTHER CLINICAL TRIALS


Since February of 2008, the TB-vaccine formulated with Intercell's adjuvant IC31® is being developed further in collaboration between Sanofi Pasteur and SSI.


In Q1 of 2008, the prophylactic vaccine against TB, based on the cooperation between Intercell, the Danish Statens Serum Institut (SSI) and Aeras Global Tuberculosis Foundation, entered a series of further clinical trials in BCG-vaccinated and latently infected individuals. The clinical trials are performed at the Karolinska Institute in Stockholm (Sweden) and at the Department of Infectious Diseases at Leiden University Medical Center in the Netherlands.


In total, there are three clinical trials with IC31®-formulated vaccines against TB currently on their way. This is the basis to create a leading franchise to fight this important disease.


TECHNOLOGY PLATFORMS: IC31® & AIP®


Two technology platforms have allowed Intercell to become one of the most innovative companies for vaccines in the biotech industry. In 2007, the enormous value of these technologies became even more evident through the significant progress of partnerships such as those with Merck, Novartis, and other major players in the industry. The progresses in scientific and clinical development, as well as the significant revenues generated through the application of Intercell's technologies, confirm the value of AIP® and IC31®.


In addition the in-house development programs are fully on track:


» Pneumococcus vaccine candidate funded by PATH on course to entering clinical Phase I trials in 2008


» Development programs and partnerships in the field of vaccines and monoclonal antibodies for Group B Streptococcus and hospital-acquired infections to be accelerated


» New partnerships for adjuvant IC31® and the definition of new vaccine candidates from AIP® expected for 2008


MANAGEMENT BOARD


In Q4 of 2007, Intercell’s Supervisory Board confirmed the members of the existing Management Board: Gerd Zettlmeissl as Chief Executive Officer, Alexander von Gabain as Chief Scientific Officer, and Werner Lanthaler as Chief Financial Officer for the next three years.


Thomas Lingelbach has been appointed in Q4 2007 as a new member of Intercell's Management Board (Chief Operating Officer). Lingelbach, who joined Intercell in 2006, plays a pivotal role in leading Intercell’s further development towards industrialization and commercialization.


Q4 2007 FINANCIAL REVIEW


REVENUES


Intercell’s revenues increased from EUR 17.0 m in the fourth quarter of 2006 to EUR 40.8 m in the fourth quarter of 2007. The strong increase was mainly due to the recognition of up-front license fees and option fees within the strategic partnership agreement with Novartis, and to a milestone payment from Merck & Co. Inc. following the start of Phase II trials for the partnered S. aureus vaccine. Revenues from collaborations and licensing therefore increased from EUR 16.0 m in the three months ended December 31, 2006 to EUR 39.2 m in the same period of 2007. Grant income increased from EUR 1.0 m in the three months ended December 31, 2006 to EUR 1.6 m in the last three months of 2007.


RESULTS OF OPERATIONS


Intercell’s net profit in the fourth quarter of 2007 increased by 382.3 percent to EUR 27.1 m compared to EUR 5.6 m in the fourth quarter of 2006. This increase was primarily due to the increase in revenues and was partly offset by an increase in research and development as well as in general, selling, and administrative expenses. Research and development costs increased from EUR 9.2 m in the fourth quarter of 2006 to EUR 13.2 m in the same period of 2007 due to the costs associated with the implementation of the commercial production process for the Japanese Encephalitis vaccine, as well as for increased headcount and spending on other vaccine programs. General, selling and administrative expenses increased to EUR 4.5 m in the fourth quarter of 2007 compared to EUR 3.4 m in the same period of the prior year. The increase was primarily due to higher personnel expenses. Net other operating income in the last three months of 2007 was EUR 1.6 m compared to EUR 0.4 m in the three months ended December 31, 2006. This increase was primarily due to higher R&D tax credits recognized in the fourth quarter of 2007. Financial income, net of financial expenses, was EUR 2.0 m in the fourth quarter of 2007 compared to EUR 0.4 m in the same period in 2006.


FULL YEAR FINANCIAL REVIEW 2007 REVENUES


Aggregate annual revenues increased from EUR 23.5 m in the year ended December 31, 2006 to EUR 53.3 m in the year ended December 31, 2007, or by 127.5 percent. In the year ended December 31, 2007, revenues from collaborations and licensing increased by 121.9 percent to EUR 47.8 m compared to EUR 21.5 m in the previous year. Grant income increased from EUR 1.9 m in the year ended December 31, 2006 to EUR 5.5 m in the year ended December 31, 2007. This increase was primarily due to a grant from PATH (Program for Appropriate Technology in Health) for Intercell’s Pneumococcus vaccine project.


RESULTS OF OPERATIONS


Driven by a strong increase in revenues from collaborations and licensing, Intercell achieved its first positive full year result. Net profit for the full year 2007 was EUR 5.0 m compared to a net loss of EUR 16.1 m in 2006. Net operating expenses also continued to increase as a result of the progress of Intercell’s development programs, going up by 32.2 percent from EUR 39.1 m in the year ended December 31, 2006 to EUR 51.7 m in 2007. Research and development costs increased from EUR 31.0 million in 2006 to EUR 40.4 m in 2007, or by 30.7 percent. General, selling and administrative expenses were EUR 14.3 m in 2007 and EUR 10.5 m in 2006, which represents an increase of 35.8 percent mainly due to an expansion of general management as well as marketing and sales capacities. Net other operating income increased from EUR 1.4 m in 2006 to EUR 3.0 m in 2007, primarily due to higher R&D tax credits. Financial income, net of expenses, was EUR 3.0 m in the year ended December 31, 2007 compared to EUR 1.3 m in the year ended December 31, 2006. Recognition of a deferred tax asset in a subsidiary resulted in an income tax credit of EUR 0.3 m in the year ended December 31, 2007 compared to net income tax expenses of EUR 0.4 m in the prior year.


CASH FLOW AND CAPITAL RESOURCES


Net cash generated from operating activities for the year ended December 31, 2007 was EUR 41.7 m compared to net cash used in operating activities of EUR 8.0 m in the previous year. The increase in cash generated in operating activities was due to the net profit and the positive effects on net working capital resulting from deferred income in connection with up-front payments from Novartis.


Net cash used in investing activities of EUR 61.2 m in 2007 and of EUR 24.8 m in 2006 resulted primarily from investments in short-term, available-for-sale financial assets for cash management purposes. Without giving effect to investments in, and proceeds from, the sale of securities, net cash generated from investing activities was EUR 2.8 m in the year ended December 31, 2007 compared to cash used in investing activities of EUR 5.0 m in the year ended December 31, 2006. The positive cash flow in 2007 resulted from cash acquired through acquisitions and from an increase in interest received.


Net cash provided by financing activities was EUR 151.2 m in the year ended December 31, 2007 and EUR 56.5 m in the year ended December 31, 2006. The 2007 financing proceeds resulted primarily from the issuance of 4.8 m new shares in the third quarter to Intercell’s strategic partner Novartis at an issue price of EUR 31.25 per share, and from net proceeds of EUR 2.8 m from the exercise of stock options.


As of December 31, 2007, Intercell had liquid funds of EUR 287.6 m, of which EUR 161.0 m was cash and EUR 126.5 m was available-for-sale financial assets.


For a detailed overview regarding financial highlights please visit www.intercell.com.


ABOUT INTERCELL AG


Intercell AG is a growing biotechnology company which focuses on the design and development of novel vaccines for the prevention and treatment of infectious diseases with substantial unmet medical need. The Company develops antigens and adjuvants which are derived from its proprietary technology platforms and has in-house GMP manufacturing capabilities. Based on these technologies, Intercell has strategic partnerships with a number of global pharmaceutical companies, including Novartis, Merck & Co., Inc., Wyeth, Sanofi Pasteur, Kirin, and the Statens Serum Institut.


The Company’s leading product, a prophylactic vaccine against Japanese Encephalitis, successfully concluded pivotal Phase III clinical trials in 2006. The Market Authorization Application (MAA) in Europe as well as the Biological License Application (BLA) with the US Food and Drug Administration (FDA) for the use of the vaccine to prevent Japanese Encephalitis were submitted in December of 2007. The licensure application to the Australian Therapeutic Goods Administration (TGA) was submitted in February 2008. The company’s broad development pipeline includes a Pseudomonas vaccine in Phase II, a therapeutic vaccine for Hepatitis C in Phase II, partnered vaccines for Tuberculosis (Phase I) and Staphylococcus aureus (Phase II), and five products focused on infectious diseases in preclinical development.


Intercell is listed on the Vienna stock exchange under the symbol "ICLL".


CONTACT INTERCELL AG:


Lucia MalfentHead of Corporate CommunicationsCampus Vienna Biocenter 2, A-1030 ViennaP: +43-1-20620-303Mail to: LMalfent(at)intercell.com


This communication expressly or implicitly contains certain advance statements concerning Intercell AG and its business. Such statements involve certain known and unknown risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of Intercell AG to be materially different from any future results, performance or achievements expressed or implied by such advance statements. Intercell AG is providing this communication as of this date and does not update any advance statements contained herein as a result of new information, future events or otherwise.

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